Party City receives delisting notice from NYSE

Party City Holdco Inc., a Woodcliff Lake-based accessories retailer, was notified by the New York Stock Exchange (NYSE) that it is at risk of being delisted for failing to maintain an average $1 per share stock price over a 30-day trading period.

While the stock will continue to trade under the ticker PRTY, it will have a “.BC” added to indicate the company is below compliance for NYSE’s standards, according to the Dec.15 notice.

In a message to investors, Party City said the NYSE notification does not affect its business operations nor its reporting requirements to the U.S. Securities and Exchange Commission (SEC).

Now, the company has six months to meet the minimum share price requirement, which calls for a closing price of at least $1 per share and an average closing price of at least $1 per share over a 30-day trading period.

In the past year, Party City’s stock hit a high of $6.55 on Jan. 6 and then began to decline. In early November, the stock price dropped below a dollar and has yet to come back up. As of Dec. 27, PRTY is trading at 35 cents per share.

NYSE’s notice comes as the party goods retailer targets $30 million in cost cuts following flat sales during its crucial Halloween season.

In an effort to offset the impacts of lower consumer demand and inflationary pressures, Party City reduced its corporate workforce by 19% and said it will trim costs associated with raw materials, operations, marketing and information technology.

After hiring Peter Smith as Party City’s new chief operations officer in November to spearhead the plan – as well as optimize its supply chain – the retailer renewed talks earlier this month with advisors to address liquidity issues and help with restructuring, Bloomberg reported, citing sources familiar with the matter.

As of the end of the third quarter, Party City had about $121.5 million of liquidity available, including about $92 million of cash available under asset-based credit lines, against nearly $1.8 billion in debt.

Since 2019, the company has been working on large-scale changes, such as restructuring its debt and closing 55 stores. 

Party City’s credit risk was downgraded in November by Fitch Ratings, which cited “rapid deterioration” in the company’s operations and liquidity along with a “likely untenable” capital structure. Due to a number of factors – such as supply chain challenges, rising input costs and “mis-execution” – Fitch said the company’s financial results have “steadily weakened” throughout the course of 2022.

And with leverage likely to remain elevated in coming months, the agency forecasts that Party City will be in a difficult position to address its capital structure, which substantively matures in 2025/2026, and would be at risk of default “unless operations meaningfully improve over the next 12-18 months.”

Founded 36 years ago in East Hanover, Party City is the largest retailer of party goods in the U.S., Canada and Mexico. It operates more than 900 company-owned and franchise outlets under the Party City, Halloween City, Toy City, Factory Card and Party Outlet brands.

Last fall, it became the first company to win an award under the state’s Emerge Program, a $14.5 billion job creation package launched using funding from the New Jersey Economic Recovery Act of 2020.

For the quarter ending Sept. 30, 2022, Party City recorded total net sales of $502.2 million, a 1.6% decrease from the third quarter of 2021. Its adjusted loss came in at $1.39 per share — wider than Wall Street analysts’ estimates of $0.10 per share.

The company also revised its business outlook for the third time this year. It now expects full-year revenue of between $2.14 billion to $2.19 billion instead of its previous forecast of $2.15 billion to $2.23 billion.

A media representative from Party City did not immediately respond to a request for comment regarding NYSE’s notice.